About Me

This site is the inspiration of a former reporter/photographer for one of New England's largest daily newspapers and for various magazines. The intent is to direct readers to interesting political articles, and we urge you to visit the source sites. Any comments may be noted on site or directed to KarisChaf at gmail.

Thursday, February 6, 2014

Republican critics of Obamacare
have lately trained their fire on a program within the health care law
that would provide a federal bailout to companies that lose money on
insurance plans they sell on the Affordable Care Act exchanges.

But the “risk corridor” program, jointly funded by the government and
the insurance industry, is not the only Obamacare program that would
offset insurance companies against excessive financial losses. The “risk
adjustment” program also provides money to insurers that lose money on
the Obamacare exchanges. However, where “risk corridors” subsidize
insurers’ losses on a plan, “risk adjustment” subsidizes losses suffered
on an individual consumer.

Here’s how the “risk adjustment” program works:

Every health insurance policy issued in the U.S., whether sold on an
Affordable Care Act exchange or through other avenues, is charged a $63
fee. The fee, ostensibly passed on to the consumer, is then set aside by
the federal government, which uses it to subsidize any policy that
costs an insurer more than $60,000 annually. This would presumably occur
because the holder of the policy is very sick, elderly or both.

The program is intended to serve as a
financial backstop for the insurance companies as they adjust to a
regulatory regime that makes it harder to raise premiums or deny
coverage. In the meantime, the subsidy will cover 80 percent of whatever
an abnormally expensive policy costs the insurer once it surpasses the
$60,000 threshold.

By contrast, “risk corridors” aim to protect insurance companies
against losses they incurred on insurance plans they sell on the
Obamacare exchanges. The money used to subsidize these losses are
financed partly by Washington, and partly by the insurance industry.
Under the program, insurers must pay 80 percent of the profits they earn
on any plan after their profits on that plan surpass 8 percent.

Meanwhile, Washington also collects 50 percent of their profits on
any plan where its profits run between 3 percent and 8 percent.

With that money, the program directs the federal government to offset
80 percent of an insurer’s losses on a particular plan offered on an
exchange, when those losses surpass 8 percent. When those losses fall
between 3 percent and 8 percent, Washington subsidizes 50 percent. Among
the goals is to prevent insurers from drastically increasing premiums
or dropping out of the Obamacare marketplaces altogether because they’re
not profitable.

This program is due to end in 2017. But given Obamacare’s rocky
implementation, Republicans are skeptical that the financing mechanism
will work, arguing that the program is unlikely to break even between
what it collects and what it pays out to subsidize unprofitable plans.
The result, they argue, will be a taxpayer bailout of the health
insurance industry.

Courage In America strives to locate news articles that may interest readers. However, while we include stories from sources which we believe to be reliable and credible, we do not write the articles nor do we establish that they are correct. We accept no responsibility for the accuracy or reliability of information provided here and encourage readers to do their own research.